Investors in Puerto Rico's bonds argued in court Tuesday over which group has a claim on sales-tax revenue that could be used to recoup their money.
In Manhattan federal court, Judge Laura Taylor Swain, who is overseeing the record $70 billion bankruptcy-like proceedings for Puerto Rico, heard about four hours of oral arguments from attorneys representing the dueling creditor groups. Both believe they have first right to the money for bond payments.
The matter is a key issue as the island restructures its debt. Puerto Rico first defaulted on its general obligation bonds in July 2016, when it failed to pay roughly $1 billion owed to its creditors, and hasn't made any payments since.
The general obligation bondholders, including a number of U.S. hedge funds, say the sales tax receipts, an important source of cash, are legally theirs first under the commonwealth's constitution. Opposing them are bondholders of Puerto Rico's Sales Tax Financing Corporation (or "COFINA," for its acronym in Spanish), who say they have the first claim.